The Study Of Imbalances In The Domestic Economy During The Transition Period

The serious problem of imbalance in the domestic economy could not be entirely explained by the mainstream economics. This thesis has applied related theory of New Institutional Economics on the research for this problem and inspected the disequilibrium of regional economy from prospective of institutions. The purpose is to guide the coordinated development of regional economy.First of all, this thesis theoretically has analyzed the effects of institutions, which have the functions of stimulation and transaction cost saving for regional economic performance, and then this thesis has proved that all the elements like institution, capital and technology could lead to economic growth. Secondly, basing on several basic theories like the Transaction Cost Theory and Theory of Property Rights, this thesis has analyzed the specific functions of the Property Rights, the Economic Marketization, the Opening Up and the current Financial Institution on regional economic growth. Thirdly, this thesis adopts the Theil Index to figure out the trend, which is rising first and then falling and rising again, of our regional economic disparity since the transformation period. The regional economic disparity is becoming the main element for the overall economic differences in a gradual way. Next, combine the New Institutional Economics, this thesis has analyzed the reasons of the heterogeneity of institutions. It has also proposed related hypothesis of inconsistency between regional institutional transition and regional economic disparity. Thirdly, this thesis has used the unit root test, co-integration test and the Granger Causality Test to analyze the statistics of economic growth, physical capital, human capital and institutional quality indicators of the whole country as well as the central and western regions from 1998 to 2013. It turns out that both institution and economy are the Granger causes and this manifests that the development of economy will also promote the perfection of system. Moreover, the test also indicates that some institutions are the Granger causes of capital investment and technological progress. Institution is a guiding role for capital investment and technological progress to some extent. Due to the correlation between institutional proxy variables, this thesis has adopted OLS approach to do the regression analysis of the whole country as well as the central and western regions in order to find the relationship between those four institutions and economic growth through empirical investigations. Finally, this thesis has reached a conclusion that differentiated system design should be adapted to different regions. The government should keep the competitive advantage of the east, promote the development of the middle and encourage the great-leap-forward development of the west, which finally could reach the goal for the regional balanced development.